As many of you have probably heard, the balance of the old Masonite property recently sold. Factory Pipe owner Ross Liberty purchased 63 acres through a limited liability corporation called Friends of Liberty. The property consists mostly of the old factory property and goes from the railroad tracks west to State Street.
While the purchase price may seem like a steal at $1.65 million, it comes with significant liabilities, including contaminants in the soil and an ocean of concrete that will have to be dealt with. The concrete removal alone is estimated to cost about $3 million. On the bright side, Ross should be able to reuse the concrete for road base, hopefully saving roughly $1 million.
Now that the sale is complete, Ross is working with local government officials to amend the general plan so he can rezone the portion of the property that fronts on State Street, changing it from industrial to commercial use. Ross’s goal is to use proceeds from the sale or development of the State Street frontage acreage to develop an industrial park on the remaining portion of the property.
Without the ability to move funds from commercial use of the State Street acreage, the remaining industrial property actually has a negative value. The cost of developing the industrial property, mitigating contaminants and removing concrete, exceed the estimated market value of the finished industrial parcels. A sad-but-true fact of life in Ukiah is that the demand for industrial property is low.
When I worked on projections with Ross, we brainstormed about who might be interested in buying the industrial property. Industrial properties in Ukiah struggle to compete with industrial properties elsewhere for several reasons.
- Housing prices here are higher than those in competing areas.
- Development costs are higher here, including fees, permits and hookups
- Transportation infrastructure is lacking
- We do not offer a robust skilled labor pool to draw from
Consequently, potential buyers of industrial property are likely to fall into one of three categories.
- Someone interested in developing a local, resource-based venture (i.e., related to grapes or timber)
- Someone who is willing to pay a higher price to develop an industrial property to take advantage of the quality of life in rural Northern California
- A local business owner who wants to expand an existing business without the logistical headaches that come with moving to a new community.
While those who haven’t lived anywhere else may wonder why people would be willing to pay a premium to live in Ukiah, I can answer that question and so can many others. Those of us who could make more money living in a big city have chosen to forego that income in favor of a smaller, more connected community, a beautiful environment, and less traffic congestion (except the Talmage and Airport Blvd. intersection). Businesspeople who require industrial property rarely have a community as nice as Ukiah to choose from. That is not to say that the almighty dollar won’t influence people to choose places like Nevada and Arizona where utilities, workers’ compensation and payroll taxes are far more business-friendly, but if a business owner looking for industrial property likes our weather, our community, and maybe happens to be an outdoor enthusiast who loves visiting the ocean, Ukiah would be hard to beat. If you know an individual who matches this description, please feel free to introduce him or her to Ross. I expect they would get along famously.
If you have questions about real estate, contact me at email@example.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.